SMM Network News:
1) macroscopically, the negotiations between China and the United States have gone further, with the market expecting twists and turns in the intensity of the Fed's interest rate cut, but the market is expected to cut interest rates in July more fully. The domestic data for June are more than expected, and the overall market atmosphere is warm. Last week, zinc continued to be under pressure, the largest decline of zinc was 2.5%, Shanghai zinc still has a certain degree of resistance, narrow oscillation, the weekly decline is only about 1%, spot due to the long single trading cycle rose smoothly, but the transaction activity gradually decreased, SMMI.Zn week fell 1.73%; In the second half of the year, some data show that the domestic economy is facing certain downward pressure, and the demand side of the commodity market is generally weak. With the release of extreme risks of trade war, the worst may pass gradually. The follow-up market focus is expected to gradually shift from the macro level to the fundamentals.
2) from the point of view of supply, with the passage of time, the pressure released by the production capacity of the smelting end is increasing, but the space for further improvement is limited. In June 2019, SMM China produced 496200 tons of refined zinc, an increase of 3.34 percent over the previous month and an increase of 15.37 percent over the same period last year. In June, the refinery in the environmental protection, relocation and other gradual end, high profits to stimulate production enthusiasm, the superimposed part of the furnace taste to increase production and other factors, the output continues to increase compared with the previous month. In June, the reduction of refineries was mainly due to the addition of routine maintenance in Anhui Tongguan, the shutdown of mining and metallurgy in Chengzhou all month, and the reduction in the output of some refineries in Yunnan Province of Chihong Zinc and Germanium. But the increment is more prominent. Among them, after the relocation of Zhuzhou smelting and the further solution of the environmental protection problems of Hanzhong zinc industry, the output gradually increased; in addition, after the maintenance of zinc and germanium in the western mining industry, the production resumed; and some refining enterprises have the current high profit, the small increase in output and the improvement of taste in the furnace, the overall increment is relatively obvious. In July, the summer routine maintenance of some refineries in the north began one after another, Henan Yuguang and medium-color zinc industry entered the maintenance state; another Chengzhou mining and metallurgy may still be difficult to recover, there is a partial reduction. However, Zhuzhou smelting is expected to reach production, Chihong zinc and germanium production recovery, Anhui copper crown maintenance end and Sihuan zinc and germanium production further increased, the increase is expected to be still more in July, 2.41% to 508200 tons compared with the previous month.
3) from the point of view of consumption and inventory, the market is cashing in on the accelerated release of smelter capacity, the spot is between the rising discount, and the downstream customers purchase on demand at low prices, while from May to July, entering the traditional off-season of consumption, the risk of weakening the consumption margin increases; Inventory, this week, the exchange inventory changes little, but the domestic social inventory continues to increase slightly, downstream galvanized inventory, color painting inventory is not significant, the overall maintenance of high, late steel mill inventory upstream transmission, further reduce raw material procurement, will form a certain negative effect on zinc prices.
4) in the medium term, in the case of overall zinc ore surplus, the logic of zinc ore transmission to zinc ingots has basically been fulfilled, and the future smelting capacity release space of smelters is limited. China's trade war has dealt a blow to global trade and possible subsequent anti-dumping disputes, and the pressure on external demand may be further highlighted. But China's policy is likely to increase the intensity and scale of counter-cyclical adjustment, which is limited on paper, but there is a rhythmic possibility. Therefore, we believe that under the expectation of uncertain growth on the consumer side, as the release of smelting capacity slows down, the zinc price will oscillate down, but the fluency is not enough.
1) it is expected that zinc prices will continue to oscillate strongly this week, testing 1.98 upward, facing the pressure level of the 60-day moving average. As capacity bottlenecks highlighted, the target was raised from 1.7 to 1.8.